Gary Brown: Are purchases encouraged by a penny?

Tuesday

Aug 30, 2011 at 12:01 AMAug 30, 2011 at 5:26 AM

When did the price for almost everything become 99 cents? We’ve all seen things priced at $9.99. I’m sure, as those who are displaying or advertising those prices must believe, we’ve told ourselves, “At $10 they’re robbing me, but at $9.99, I’ve got myself a real steal.”

Gary Brown

When did the price for almost everything become 99 cents?

We’ve all seen things priced at $9.99. I’m sure, as those who are displaying or advertising those prices must believe, we’ve told ourselves, “At $10 they’re robbing me, but at $9.99, I’ve got myself a real steal.”

A purchase is encouraged by a penny. Lincoln’s profile is apparently alluring –– a penny saved is a penny earned.

But if a penny below 10 bucks is a price enticement, what is a nickel less than a 10-spot? Does it make you stop in a store, look and say, “Wow, $9.95! I don’t really need it, but for a nickel below $10, maybe I should buy two and save a dime, sort of ...”

NICKEL AND DIME

And who decides whether the price of something is $9.95 or $9.99? How is the price picked?

Is there a lot of study involved? Do corporations send training teams into stores to explain the “empirical data proving the superior performance of a $9.95 price over a $9.99 price, when taking into consideration gross operating expenses, suggested retail price, per unit profit, increased sales ...” and any other factors that might fit neatly into a PowerPoint presentation?

Do stores rely on tradition? If I looked more deeply into product pricing, would I find that certain stores have prices that end in .99 and other stores have prices that end in .95 — always have, always will — and store owners are so partial to their pricing that they won’t even sit at the same table during weekly civic group luncheons?

Or is it just mere chance, a coin toss? If the guy with the pricing gun reaches into his pocket for a coin to flip and pulls out a penny, the price is $9.99. If he pulls out a nickel, the price is $9.95. He doesn’t even have to bother doing the flipping.

It might be just a guess.

“OK, at $10, we’ve got this $8 thing overpriced, how much do you think we need to lower it so customers won’t notice?”

IN THE PAST

It’s all psychological. A price of $9.99 just sounds less expensive than $10.

Personally, I feel more secure with prices that end in less routine numbers. Give me a price that ends in 32 cents or 67 cents or 84 cents, and I’ll believe that the seller has put some thought into the deal.

“All right, I’ve considered wholesale cost, my per item overhead, advertising expenses, the influence of inflation on a typical customer’s discretionary income and I believe that $10.53 cents is exactly the fair price of this item for both the store and the shopper.”

I’m buying it — both the story and the product.

I am a little worried that $10.53 sounds less expensive to me than $9.99 or even $9.95, but that’s my economic issue.